| ormula is pretty simple: your small business must pay | | | | starters, keep clear and concise records. You can |
| taxes on what's left of your revenues after you have | | | | deduct expenses two ways: |
| deducted all your expenses. That said, it would seem | | | | The first option is to claim a deduction by counting how |
| to make sense to claim the maximum allowable | | | | many miles you drove while on business. Currently, you |
| number and amount of deductions in order to reduce | | | | can claim a deduction of 44.5 cents per mile. Check to |
| your tax liability. Luckily, the IRS gives you lots of | | | | make sure that is the current amount, as it does |
| choices as to tax deductions that you can legally claim. | | | | change occasionally. The other option is to track your |
| Here are some deductions that you should think about | | | | total expenses incurred on things like gasoline, repairs |
| when doing your business tax planning. | | | | and maintenance. |
| Here's some allowable tax deductions that you don't | | | | Remember: keep good records. If you’re using |
| want to miss. | | | | your own personal vehicle for your small business, |
| 1. Deductions for Start-up Costs | | | | make sure you separate the times you use it for |
| In your first year of small business, you are allowed to | | | | business from the times you do not. Include dates, |
| write off as much as $5,000 in start-up costs. In | | | | destinations, purpose of the travel, etc. Read IRS |
| addition you can write off an additional $5,000 in | | | | Publication 463 for more info. And here’s an |
| organizational costs. Not only that: you also have the | | | | important point: if your employees use a business |
| option of spread out expenses not deducted in the | | | | vehicle while running personal errands, for example, |
| first year over a period of 15 years, beginning with | | | | you have have to show this as income to them on |
| when you opened your business. Eligible costs include | | | | their W-2. |
| things like market research, company advertising, | | | | A couple of other things to remember: If you bought a |
| training of your employees, travel for business, legal | | | | new (or previously owned) car, you can take a |
| advice and other costs. Consult your tax professional | | | | write-off. You’ll have to decide if it’s |
| for more details. | | | | better to take it in one single deduction or spread out |
| 2. Deductions for Education | | | | over a period of time through depreciation. And if that |
| First stop: IRS Publication 970, “Business | | | | car is a hybrid, you might be eligible for a tax credit. |
| Deductions for Work-Related Education.” For | | | | Read IRS Publication 8910 for more details. As always, |
| the most part, you can write off expenses related to | | | | consult your tax professional for more details. |
| your employees’ education if the courses relate | | | | 4. Deductions for Equipment |
| to their jobs. | | | | You have the ability to take a write-off for small |
| In other words, if the course helps them keep pace | | | | business equipment purchases. The write-off can be |
| with the marketplace demands (or improve their skills) | | | | pretty large — in 2006 it amounted to over $100 |
| or if they need the course to actually keep their | | | | thousand. And the equipment can be used; the only |
| existing jobs, then the expense may be a legitimate | | | | requirement is that you use it at least half the time for |
| deduction. The bad news is that you can’t take | | | | your company. Allowable equipment includes things like |
| a write-off on any expense related to training in a new, | | | | computer hardware, machinery, office furniture, |
| unrelated field. A couple of other things to remember: | | | | automobiles and other related equipment. |
| You can also claim a write-off if you are | | | | Make sure you read a current copy of IRS Form 4562 |
| self-employed. Deductions also include the cost of | | | | before planning your tax strategy on this point. If you |
| getting to and from the classes. Consult your tax | | | | decide you are not going to claim this write-off |
| professional for more details. | | | | immediately, you can spread it out over a period of |
| 3. Deductions for Vehicles | | | | years by claiming depreciation on that equipment. |
| Be careful here: the rules for deducting automobile | | | | Consult your tax professional for more details. |
| expenses are pretty detailed and the Feds pay close | | | | 5. |
| attention to anyone claiming these deductions. So, for | | | | |